Strategy and Diversification

THE GROUP'S RETAIL BRANDS ARE POSITIONED TO CREATE SUSTAINABLE SHAREHOLDER VALUE BY OFFERING MERCHANDISE TO CUSTOMERS ACROSS ALL MARKET SEGMENTS AND INCOME GROUPS THROUGH STORE-BASED AND OMNI-CHANNEL RETAILING.

DIVERSIFICATION STRATEGY

The group embarked on its strategy to diversify the business and reduce the reliance on credit sales. In 2014, the group acquired the Beares brand with a focus on higher LSM group of 7-8 with higher proportion of cash sales.

In 2017, the group doubled its store base outside of South Africa to 116 stores with the acquisition of Ellerines and Beares stores in Botswana, Lesotho, Namibia and eSwatini. Stores outside South Africa now account for 18.2% of the group’s merchandise sales.

The acquisition of cash retailer United Furniture Outlets (UFO) in 2018 enabled the group to access a higher income customer market.

The diversification across retail channels was realised in May 2018 when the group launched INspire, an omni-channel retail offering marketed through outbound and inbound call centres, agents and digital platforms including online shopping at www.inspire.co.za.

  • Medium-term growth strategies are developed by executive management and reviewed and approved by the board. These growth strategies are developed by taking into account internal and external factors, risks and opportunities, resources and relationships, and key interdependencies.
  • The strategy is further supported by detailed budgets and forecasts, information technology solutions, human capital requirements and operational policies and procedures.
  • Material issues and risks that could impact on the group’s strategy, its stakeholders and its ability to sustain growth are reviewed on a continuous basis as part of the strategic planning process.
  • Action plans are developed to achieve the strategic objectives and also to manage the material impacts on the group.
Material impacts, performance indicators and targets
      Targets
Strategic focus area Performance indicators Achieved
2019
2019 2020 Medium- term
Merchandising
and supply chain
Gross profit margin (%) 41.2 38 – 42 38 – 42 40 – 43
Credit
management
Debtor costs
as a percentage
of net debtors
13.3 15 – 18 13 – 17 13 – 16
Satisfactory paid customers(%) 71.4 67 – 70 70 – 72 70 – 72
Execution of
business model
Operating profit margin(%) 7.2 5 – 10 7 – 10 10 – 15
Credit sales as a
percentage of total sales
57.9 56 – 60 56 – 60 56 – 60
Increase in operating costs
(excluding debtor costs)
       
– Traditional retail 7.2 3 – 5    
– Group 13.7 13 – 15 6 – 8 5 – 7
Capital
management
Gearing (%) Ungeared Ungeared Ungeared Less than 25